Kioxia takeout gets cool response

By Wakako Sato

TOKYO, Jan 17 (LPC) - Kioxia Holdings, the new owner of Toshiba’s memory chip unit, drew a cool response to the first round of syndication of its ¥1.028trn (US$9.35bn) takeout financing, as doubts around the semiconductor industry dampened the appeal of a high margin by Japanese standards.

Six domestic banks joined the deal, committing around ¥238bn combined, leaving mandated lead arrangers and bookrunners Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp holding more than three-quarters of the debt.

The three megabanks launched the loan last November after originally signing it in May and plan to sell it down further by the end of March.

The lukewarm response to the first phase of syndication, however, shows that Japan’s domestic banks remain extremely selective in their search for higher returns.

Kioxia’s five-year deal offers an interest margin of about 240bp over Tibor in a market where plain-vanilla corporate loans typically pay less than 100bp at the same maturity.

Other recent leveraged buyout loans have paid under 200bp, including Calsonic Kansei’s ¥1trn seven-year loan backing its LBO of Italian high-tech car parts maker Magneti Marelli last year.

Lenders see Kioxia as a riskier proposition given the sluggish performance of the semiconductor industry. Kioxia lifted sales and narrowed losses in the three months to September 30 2019, but it is a long way from making a profit, with a ¥151bn loss in the six months from April-September.

Japanese conglomerate Toshiba sold its memory chip unit in 2018 to raise money, but retains 40.2% of the voting rights. The new owners, led by US private equity firm Bain Capital, included long-time customers Apple, Dell Technologies and Seagate Technology.

Local media reported in 2019 that Kioxia would buy out the three US tech companies ahead of a stock market listing later in the year. Kioxia said in June it had used the proceeds of the new loan and a ¥300bn placement of preferred stock to Development Bank of Japan to reorganise its capital structure, without giving details. A stock market listing has yet to materialise.

The ¥2trn acquisition of Toshiba Memory Corp in 2018 was Asia’s largest leveraged buyout. A ¥600bn loan in June 2018 from a bank group led by Mizuho and SMBC helped fund the acquisition.


Kioxia’s ¥1.028trn borrowing refinances the original LBO financing and follows other large deals that drove up syndicated loan volumes in Japan to US$237.54bn in 2019, a six-year high, according to Refinitiv LPC.

In September, Takeda Pharmaceutical raised a ¥700bn loan to refinance a US$30.85bn bridge financing that backed the £46bn (US$62bn) acquisition of London-listed rare-disease specialist Shire. The bridge, completed in June 2018, remains Asia’s largest syndicated loan.

In January last year, Renesas Electronics completed a ¥897bn financing to take out a bridge loan backing its US$6.7bn acquisition of US chip-design firm Integrated Device Technology.

M&A activity in Japan in 2019 skyrocketed 40% year on year to US$130.7bn and to a 21-year high, according to Refinitiv data.

Market participants expect event-driven financing activity to remain strong as Japan Inc continues its overseas shopping spree and conglomerates carve out non-core assets in search of growth in a stagnant domestic economy.

“We can expect a substantial volume of acquisition financing deals this year, including take-out financings for the bridge loans backing acquisitions that have already been announced,” said Mutsumi Shirakawa, head of the loan and capital markets department at MUFG.

One big-ticket financing on the cards is for electronics maker Showa Denko, which plans to borrow up to ¥695bn in late 2019 for its proposed acquisition of Hitachi Chemical. Mizuho is providing two loans – a ¥295bn facility for Showa Denko and an additional ¥400bn financing for its special purpose company, HC Holdings – that could be launched into wider syndication this year. ( Reporting By Wakako Sato; editing by Prakash Chakravarti and Steve Garton)